Memorandum

11 March 2009

Ministry of Enterprise, Energy and

Communications
Ministry of the Environment

Climate and energy policy for a sustainable future

Today, the Swedish Government is presenting two government bills

which together constitute An integrated climate and energy policy for the
period up to 2020. This proposal represents the most ambitious climate
and energy policy ever presented by a European country.

The Government proposes objectives and strategies that will lead to: half
of Sweden’s energy coming from renewable sources in 2020; the country
having a vehicle fleet that is independent of fossil fuels in 2030; and
Sweden’s net emissions of greenhouse gases being equal to zero by the
middle of the century. Our climate target for 2020 is to reduce
greenhouse gas emissions by 40 percent.

The government bills presented today for An integrated climate and

energy policy are the result of a long process. As soon as this
Government came to power, we began making active endeavours to drive
forward work at the European level to formulate ambitious climate and
energy objectives across the EU, focusing on the year 2020. The process
was completed just before the end of last year, when the EU
strengthened its leading position in the world, as regards solving the
global climate problem, by reaching a concrete and joint agreement. The
Government is now continuing its international work aimed at a far-
reaching global climate agreement at the UN Climate Change
Conference in Copenhagen in December 2009, where Sweden will have a
central position as President of the EU.

Facing up to the climate challenge and creating sustainable energy supply

requires cooperation both between all the countries of the world and
between all sectors in society. The Government has therefore consulted
the whole of Swedish society in different fora to discuss the transition
we now face. The Swedish Climate Committee, a parliamentary
committee set up to create the right conditions for broad political
support, put forward proposals for objectives and measures. Sweden’s
foremost experts on climate change were appointed to the Scientific
 2

Council on Climate Issues, which put forward scientifically based

proposals for Swedish climate targets.

In light of this, the Government submits proposals to the Swedish

Riksdag on a combined climate and energy policy for the environment,
competitiveness and long-term stability. A concrete strategy is being
presented to quickly break Sweden’s dependence on fossil energy and
drastically reduce our negative impact on the climate. This not only
places demands on both enterprises and citizens but also creates new
opportunities and a way out of the current economic crisis - towards fair
and sustainable global development.

Investment in renewable energy and more efficient energy use are

strengthening Sweden’s competitiveness and putting Swedish research
and Swedish enterprises at the forefront of the global climate transition.
We are laying the foundations for new innovations, new enterprises and
new jobs in green industries of the future.

A summary of the climate and energy bills

The Government’s proposals are being submitted in the form of two

government bills. The climate policy bill specifies targets for greenhouse
gas emissions and a joint action plan to achieve them. The energy policy
bill contains proposals relating to the energy sector.

The action plans proposed for a fossil-independent transport sector and

to promote renewable energy and energy efficiency improvements are
crucial to the achievement of the climate policy goals. The Government
has chosen to present the action plan for a fossil-independent vehicle
fleet in the climate policy bill and the action plans for energy efficiency
improvements and renewable energy in the energy policy bill.

Climate and energy targets by 2020

The government bills specify a number of targets for climate and energy
policy to be achieved by 2020:

• 40 percent reduction in climate emissions. This target relates to the

non-trading sector (i.e. activities not included in the EU emissions
trading scheme).
• 50 percent renewable energy.
• 20 percent more efficient energy use.
• 10 percent renewable energy in the transport sector.
 3

Three action plans for climate and energy conversion

The bills contain three action plans for climate and energy conversion
and a summary of the measures for reducing emissions by 40 percent.

1. Action plan for renewable energy

The Government presents an action plan for renewable energy in order
to reach the target of 50 percent renewable energy. The measures include
raising the level of ambition in the electricity certificate system,
continued efforts to facilitate grid connections for renewable electricity
and a planning framework for wind power of 30 TWh.

2. Action plan for energy efficiency

The Government will invest SEK 300 million (ca EUR 27.3 million) per
year between 2010 and 2014. A number of measures are presented to
ensure Sweden reaches the proposed targets and fulfils the requirement
in the EU Energy Services Directive. Efforts will focus primarily on
reducing the information and knowledge gaps in order to make
households and enterprises aware of the opportunities they have to save
money, energy and the environment by improving their energy
efficiency. The Government will revisit this in the 2010 Budget Bill and
propose a more detailed allocation of funding between the various parts
of the energy efficiency programme.

3. Action plan for a fossil-fuel independent vehicle fleet

The target is for Sweden to have a vehicle fleet that is independent of
fossil fuels by 2030. General policy instruments that put a price on
greenhouse gas emissions coupled with beneficial conditions for cars
with a low environmental impact running on alternative fuels will
encourage a different choice of fuel. The blend of renewable fuel in
petrol and diesel will be increased and initiatives will be taken on plug-in
hybrids and electric vehicles.

Measures to reduce emissions by 40 percent

A special action plan is presented to reduce Swedish emissions by 20
million tonnes by 2020. The target will be reached with a combination of
measures in Sweden (2/3) and green investments in other EU Member
States and in developing countries.
 4

An integrated climate and energy policy

Emission targets for Sweden by 2020

Emissions in Sweden should be 40 percent lower in 2020 than they were
in 1990. The target applies to activities not included in the emissions
trading scheme. This means that greenhouse gas emissions will be about
20 million tonnes of carbon dioxide equivalents lower for the sectors
outside of the EU emissions trading scheme in 2020 compared to the
1990 level. The decrease shall be achieved by reducing emissions in
Sweden and in the form of investments in other EU Member States or
flexible mechanisms in accordance with the Kyoto Protocol, such as
CDM (Clean Development Mechanisms).

The level of ambition for reducing emissions from activities covered by

the EU emissions trading scheme is determined jointly at the EU level
within the framework of the trading scheme’s rules. These emission
reductions are hence not included in the national target.

The national target shall make a substantial contribution to a global and

overarching climate agreement. Sweden’s own targets are expected to be
more ambitious than the country’s undertaking within the framework of
EU cooperation. The Government is also raising the bar compared to the
recommendations of the Climate Committee (38 percent) and the
Scientific Council (20-25 percent). In its climate bill in the spring of
2006, the previous government came to the conclusion that Sweden’s
emissions should be 25 percent lower in 2020 than they were in 1990.

Long-term objective
The goal is to limit the global increase in mean temperature to a
maximum of 2°C. Sweden’s climate policy has been designed to make
our contribution to stabilise long-term greenhouse gas concentrations in
the atmosphere at a maximum of 400 parts per million carbon dioxide
equivalents (ppmv CO2e).

The vision is to reduce Sweden’s net emissions to zero by 2050. This

focus means that Sweden will take the lead in implementing the
necessary long-term global emission reductions.

Measures to reduce emissions by 40 percent

The national target will be achieved through a combination of measures
in Sweden and international climate investments, known as “flexible
mechanisms”, in accordance with the Kyoto Protocol or mechanisms
included in any future climate agreement.
 5

Estimated reduction between 1990 and 2020 (ca. millions of tonnes)

Emission reductions achieved between 1990 and 2007 4
Forecast – previously adopted national measures 2008-2020 5
New environmental taxes and green investments 2
National implementation of the EU climate action
and renewable energy package 2
Reduction other measures 0.3
Climate investments within the EU and in developing countries
using flexible mechanisms, such as CDM 6.7
Total 20

Emissions decreased by four million tonnes in the non-trading sector

between 1990 and 2007. A further reduction of 16 millions of tonnes is
still needed in order to reach the target of 40 percent.

According to Swedish Environmental Protection Agency forecasts,

existing policy instruments will lead to further emission reductions
between 2008 and 2020 of approximately five million tonnes of carbon
dioxide equivalents.

The Government has proposed taxation amendments and other

economic instruments that are expected to lead to a reduction of two
million tonnes by 2020. Environmental taxes put a price on emissions
and make it more expensive to use things that are harmful to the climate.
Such instruments include increased carbon-related differentiation in
vehicle tax, lower tax on alternative fuel vehicles, increased fuel tax on
fossil fuels, less reduction in carbon tax for industry and agriculture and
a higher carbon tax rate.

The Climate action and renewable energy package agreed by EU leaders

in December 2008 is a central component of the Swedish policy to limit
emissions even in the non-trading sector. Legislation containing binding
vehicle emission control requirements will be introduced gradually as
from 2012, starting at 120 grams per kilometre and progressing to 95
grams per kilometre in 2020. Together with the European directive on
the promotion of the use of energy from renewable sources, which
enables a higher blend of renewable fuel in petrol and diesel, and
forthcoming requirements on light commercial vehicles (small trucks,
vans), the measures will reduce emissions by a further two million tonnes
of carbon dioxide equivalents by 2020.

Other national measures, described in the bill, are expected to reduce

emissions by at least 0.3 million tonnes in total.
 6

Green investments in developing countries are crucial to an adequately

far-reaching global agreement. A third of Sweden’s reduction until 2020,
6.7 million tonnes, will be achieved in the form of investments in other
EU Member States or flexible mechanisms like CDM. These emission
reductions can be credited to Sweden.

With its integrated action plans, the Government is paving the way
towards a 40-percent reduction in Sweden’s emissions from the non-
trading sector between 1990 and 2020.

Energy policy objectives

The Government proposes that the share of renewable energy should be
at least 50 percent of total energy consumption and at least 10 percent in
the transport sector by 2020. It is also establishing a target of 20 percent
more efficient energy use by 2020.

The EU directive on renewable energy calls on Sweden to achieve a share

of at least 49 percent renewable energy by 2020. Sweden is in a position
to have a higher level of ambition and a greater share of renewable energy
will also help to achieve the overarching objectives of ecological
sustainability, competitiveness and security of supply. The Government
therefore proposes a higher target for renewable energy than the one
established in the EU directive.

The energy efficiency target for 2020 shall apply to all sectors in society
and include efficiency improvements at all stages of energy supply. The
target involves a reduction in energy use of 20 percent per unit of GDP
between 2008 and 2020.

Three action plans for climate and energy conversion

1. Action plan for renewable energy

The level of ambition in the electricity certificate system shall be raised
in order to achieve the target of 50 percent renewable energy. The new
target for the production of renewable electricity involves an increase of
25 TWh by 2020 compared to the 2002 level. The Swedish Energy
Agency shall be tasked with analysing and submitting proposals on how
the level of ambition is to be raised.

The Government is continuing its endeavours to facilitate grid

connections for renewable electricity. The conditions for sea-based wind
power connections shall receive particular attention.

To facilitate the expansion of wind power, a planning framework for

wind power of 30 TWh is proposed, 20 TWh of which shall be on land
and 10 TWh offshore. According to this planning framework, Swedish
 7

municipalities and county councils will also identify in their

comprehensive plans suitable areas where 30 TWh of wind power can be
generated.

Biogas can have an important role in the future Swedish energy system.
The promising ongoing development in biogas for vehicles in Sweden
should therefore continue to be stimulated.

In the Government’s opinion, Sweden’s rural development programme

for 2007-2013 should be utilised to support and improve the production
and processing of renewable energy. Agriculture and forestry are
important sectors for the production of renewable energy. Increasing
renewable energy use also creates a great deal of scope for the
development of enterprise in rural areas.

A more detailed action plan to reach the renewable energy target will be
presented no later than in June 2010.

2. Action plan for energy efficiency

The Government presents an action plan for energy efficiency,
proposing an ambitious target of 20 percent more efficient energy use by
2020. The increased efforts in energy efficiency aim to ensure that
Sweden fulfils the requirements in the Energy Services Directive and that
the proposed target is reached.

The Government will invest SEK 300 million (ca EUR 27.3 million) per
year between 2010 and 2014 - a two-fold increase on the current level.
The successful efforts already being made will be strengthened
considerably. The focus will be on reducing information and knowledge
gaps. It is important to make households and enterprises aware that they
have the opportunity to save money, energy and the environment by
improving energy efficiency.

The public sector shall lead the way as regards energy efficiency
improvements. Higher demands will be placed on authorities to procure
more energy-efficient products and identify existing energy efficiency
potential. Municipalities and regional county councils will be offered the
chance to enter into voluntary energy efficiency agreements. In return,
they shall establish energy efficiency targets and place clear requirements
on energy efficiency in their procurements.

Efforts will be broadened in industry. Enterprises that are not part of the
existing programme for improving energy efficiency in energy-intensive
industries will be paid for implementing an “energy audit”.

Energy-efficient products must be available to consumers in order to

create a more energy-efficient society. The successful investments in
 8

technology procurement and the introduction of energy-efficient

technology on the market will be strengthened.

Requirements for individual electricity and hot water metering are to be

introduced for new and refurbished buildings. Clarifying the costs of
energy use encourages more energy-efficient behaviour.

3. Action plan for a fossil-fuel independent vehicle fleet

In 2030, Sweden should have a vehicle fleet that is independent of fossil
fuel. Currently, the transport system is almost completely dependent on
fossil fuel and is dominated by road transport. Emissions from domestic
transport made up one third of the total emissions in Sweden in 2007.
Swedish industry can be in the vanguard of the transition, by e.g.
developing hybrid vehicles, electric cars and biofuel.

General instruments that put a price on greenhouse gas emissions should

form the basis of the efforts to reduce the impact on the climate caused
by the transport sector. These instruments need to be supplemented by
more targeted instruments that further promote development towards a
fossil-independent transport sector. The Government is now proposing
several taxation changes and tighter economic instruments, such as
vehicle tax relief for green cars, making it more expensive to use fossil
energy and cheaper to use environmentally friendly fuels.

The Government intends to initiate a dialogue with the various sector

actors in order to continue developing the action plan by:

Strengthening Sweden’s automotive cluster. Long-term efforts strengthen

the competitiveness of the Swedish automotive cluster and promote
greener vehicle technology and fuel development.

Extended subsidy to establish filling stations for renewable fuel.

Increased admixture (blend) of biofuel. To bring about a rapid increase in

biofuel, the Government is keen to implement the new fuel quality
directive as early as possible. This directive allows admixtures of up to
ten percent of ethanol and seven percent of biodiesel (FAME).

Binding emission standards for automotive manufacturers. The standard

will be set at a highest permissible average of 120 grams carbon dioxide
per kilometre for new passenger cars. This will be gradually tightened
and reduced to 95 grams of carbon dioxide per kilometre in 2020.

Sustainability criteria for the production of biofuel. The production of

biofuel and other liquid biomass propellants must fulfil sustainability
criteria to be counted towards national renewable energy targets.
 9

Quota requirement for biofuel. The Government has given the Swedish
Energy Agency the task of analysing the conditions for and
consequences of a quota requirement system to speed up the
introduction of renewable fuel in the transport sector.

Continued focus on biogas. The potential for producing biogas from

different types of organic waste in society shall be exploited and biogas
shall be used as a fuel in the transport sector.

Continued efforts to develop second-generation biofuels. The development

of second-generation biofuels will be supported and SEK 875 million (ca
EUR 79.4 million) will be earmarked between 2009 and 2011 for the
commercialisation of new energy technology, including biofuel
demoplants.

Electric vehicles and plug-in hybrids. Assignments to develop an

integrated knowledge base on the market for electric vehicles and plug-in
hybrids shall provide a better understanding for whether and how this
market needs further stimulus.

The Government is also lobbying for better consumer information on

vehicle fuel consumption in the EU, to increase knowledge about eco-
driving and greater compliance with speed limits.

Aviation should bear more of the costs for its own emissions. As from
2012, aviation will be included in the EU emissions trading scheme,
thereby putting a price on its emissions.

Climate tax package

Taxes on energy and emissions are effective instruments to achieve

targets within the climate and energy area. By changing taxes and other
instruments, we can influence the attitudes and behaviour of both
households and enterprises.

In its previous budgets, the Government has implemented extensive tax

changes to reduce emissions. An integrated climate and energy policy
presents changes to different taxes and subsidies in order to reduce
greenhouse gas emissions by a further two million tonnes by 2020, in
addition to the major reductions which currently applicable instruments
are expected to bring about. The aim should be to balance future
increases in energy and environmental taxes for enterprises and
households against equivalent tax concessions.

To stimulate and quicken the pace of a transition to a more eco-friendly

vehicle fleet, the climate bill proposes that new green cars shall be
 10

exempted from vehicle tax for the first five years. The current “green car
premium” will be replaced by a long-term tax concession. The change
should come into force on 1 January 2010, but will apply retroactively to
vehicles taken into service as from 1 July 2009. The current definition of
a “green car” will continue to apply and petrol and diesel-powered
passenger cars emitting less than an average of 120 grams of carbon
dioxide per kilometre will also be exempt from vehicle tax. One
difference compared to today’s current green car premium is that the tax
exemption not only applies to cars bought by private individuals but also
to those bought by enterprises, e.g. company cars.

Emissions will be taxed more by increasing the carbon differentiation of

the vehicle tax. The carbon component of the vehicle tax will be raised
from SEK 15 to SEK 20 (ca EUR 1.36 to EUR 1.81), leading to a tax
increase of SEK 5 (EUR 0.45) for each gram of carbon dioxide emitted
by a vehicle. New light commercial vehicles (small trucks, vans and small
buses) and mobile-homes will be incorporated in the carbon-based
vehicle tax. The fuel factor for diesel vehicles will be reduced and the
environmental factor will be replaced by a fixed amount. All in all, this
will lead to a decrease in the tax on diesel vehicles.

The energy tax on diesel will be raised in two steps by a total of SEK 0.40
(EUR 0.036) per litre. The first increase of SEK 0.20 should be
implemented on 1 January 2011 with the second SEK 0.20 increase on 1
January 2013. To compensate heavy goods traffic for the increase in
diesel tax, the tax on heavy goods vehicles and heavy-duty buses should
be reduced.

The tax on household waste combustion should be abolished from 1

September 2010. This tax was introduced on 1 July 2006, but has had
only a negligible effect and led merely to the unnecessary transportation
of household waste. This will be balanced by increasing the general
carbon tax by SEK 0.01 (EUR 0.0009) per kg of carbon dioxide.

It is proposed that the current reduction in carbon tax for energy-

intensive enterprises (known as the “0.8 percent rule”) be phased out in
two steps. Furthermore, the Government wishes to see economic
instruments for facilities included in the EU emissions trading scheme
coordinated to a greater extent.

The reduction in carbon tax for heating in agriculture, forestry and

aquaculture and in industries not covered by the EU emissions trading
scheme will decrease. The tax rate will be raised from 21 percent to 30
percent in 2011 and to 60 percent in 2015. Furthermore, it is proposed
that the carbon tax rebate for diesel in agricultural and forestry
machinery be reduced.
 11

In addition to the annual adjustment in accordance with the consume

price index, the general carbon tax level should be adapted to the
necessary extent and at the necessary rate to ensure that it, in
combination with other changes to economic instruments, brings about
an overall reduction in greenhouse gas emissions of a further two million
tonnes by 2020.

Nuclear power

Nuclear power will be an important part of Swedish electricity

production for the foreseeable future. With an increased focus on climate
change, nuclear power fulfils one of the most important requirements
placed on today’s energy sources, i.e. that it only leads to low greenhouse
gas emissions.

The Government intends to return to the Riksdag soon with a proposal

to abolish the Nuclear Phase-Out Act. A commission will be tasked with
developing proposals for new legislation governing the public scrutiny of
new plants that facilitate controlled generational change in Sweden’s
nuclear industry. This effectively revokes the ban on new constructions
in the Nuclear Activities Act.

A condition governing the design of the new regulatory framework is

that permission to build new reactors will only be given if they replace
one of the existing ten reactors and are built on existing sites.
Government support for nuclear power in the form of direct or indirect
subsidies will not be forthcoming, however. Important conditions
governing continued nuclear power generation are that safety standards
continue to be improved and that the responsibility for accidents is
further tightened within the scope of existing international treaties.

Green investments in developing countries

Investments in developing countries are the key to bringing about

sufficiently large emission reductions on a global scale. An important
condition of a global agreement is the ability of developed countries to
demonstrate their fulfilment of undertakings laid down in the existing
climate regime. Another key condition is the underpinning of a future
regime by efforts to support technology transfer, dissemination,
knowledge and capacity building in developing countries as the basis for
mitigation and adaptation.

Green investments, in the form of flexible mechanisms, such as CDM,

are therefore crucial to bring about an international climate agreement
and to mobilise capital to achieve adequate emission reductions. Rapidly
growing economies should not have to make investments that lock them
 12

into fossil fuel dependence. It is not just a question of solidarity but also
of obtaining the greatest possible climate benefit for every invested
Swedish krona.

Climate policy and development cooperation

Climate change is directly linked to development in developing

countries, especially in the least developed countries and for the most
vulnerable population groups. Many developing countries are particularly
exposed and vulnerable to climate effects. Between 2009 and 2011, the
Swedish Government will invest over SEK 4 billion (ca EUR 363
million) of its development assistance in climate and development.
Efforts to support adaptation to climate change can involve measures
aimed at reducing people’s vulnerability, e.g. investments in health,
sanitation and clean water, as well as projects that are directly related to
the climate, e.g. weather forecasts and flood defence construction.

Efficient energy markets

Well-functioning energy markets create better conditions for energy

supply, the environment and growth. A Nordic electricity market is
necessary for the efficient exploitation of common production resources
in the Nordic region. Bottlenecks in the Nordic electricity grid and
between the Nordic region and the rest of Europe shall be eliminated.

District heating and combined power/heating make it possible to utilise

energy that will otherwise be lost and to exploit society’s energy
resources as efficiently as possible. The gas market and infrastructure
should be developed so that they support a gradual introduction of
biogas.

Greater focus on climate change adaptation

Climate change increases the risk of flooding and landslides as a result of

an increase in intensive precipitation and rising water levels. A climate
change adaptation policy is being developed. The Government has
earmarked SEK 300 million (ca EUR 27.3 million) for 2009-2011.

• The county administrative boards will be given the overarching

regional responsibility to coordinate climate adaptation. SEK 25
million (ca EUR 2.28 million) a year will be set aside during 2009-
2011.
 13

• Lantmäteriet (National Land Survey) will receive SEK 40 million

(EUR 3.64 million) per year in 2009-2011 to develop a new altitude
database to improve the knowledge base for risk assessment and
action planning to minimise the risk of landslides.

• The need to adapt spatial planning to the greater risks of landslides

will be dealt with as part of the ongoing review of the Swedish
Planning and Building Act.

• The Swedish Environmental Protection Agency will be given the task

of investigating the effects of climate change on the loss of
biodiversity and ecosystem services and looking into feasible
measures to limit the negative effects.